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Progressive's $500M Senior Notes Receive Rating Action

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Progressive Corp.’s (PGR - Free Report) 2.45% $500 million senior unsecured notes, due 2027, recently received rating action from A.M. Best. The credit rating giant assigned an issue rating of “a” to the unsecured notes with a stable outlook.

However, the property and casualty insurer’s issuer credit rating of “a” as well as its existing issue ratings remained unchanged. The ratings of its operating insurance subsidiaries did not undergo any change either.

Progressive plans to deploy the net proceeds from this issuance for general corporate purposes.

Owing to the issuance, Progressive’s financial leverage is likely to increase modestly. Nonetheless, the same will remain within the guidelines of the credit rating agency to support the current ratings.

Progressive had announced the pricing of the aforementioned senior unsecured notes on Aug 22, 2016. Notably, these notes also received rating action from Moody’s Investors Service, a wing of Moody’s Corporation (MCO - Free Report) . The rating giant assigned A2 rating to these notes with a stable outlook.

In a nutshell, Moody’s A2 senior debt rating represents Progressive’s strong foothold in the U.S. auto insurance market, outstanding underwriting and expense management, balanced distribution channels, and solid balance sheet.

Rating affirmations or upgrades from credit rating agencies play an important role in retaining investor confidence on the stock as well as maintaining credit worthiness in the market. Hence, it is expected that such ratings will help the company write more business in the future.

Zacks Rank and Stocks to Consider

Currently, Progressive carries a Zacks Rank #4 (Sell). Some better-ranked stocks from the same space include Allied World Assurance Company Holdings, AG (AWH - Free Report) and National Interstate Corporation (NATL - Free Report) . Both these stocks sport a Zacks Rank #1 (Strong Buy).

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